China Mobile 3G cost seen at $56b
The carrier estimates fixed-line rivals may have to pay twice that amount
China Mobile (Hong Kong), the Hong Kong-listed arm of China's dominant mobile-phone carrier, estimates it will cost 60 billion yuan (HK$56.21 billion) to build its next generation mobile network.
However, China Mobile executive director He Ning said it would cost fixed-line operators - China Telecommunications Corp Group and China Netcom Group - twice as much as mobile carriers to build their third-generation (3G) networks as they lacked a 2G network to build on.
At a CLSA investment conference in Beijing on Tuesday, Mr He said that because China Mobile had a nationwide 2G mobile network to leverage from, the building costs for a 3G network would be 60 billion yuan, compared with a greenfield operator's 100 billion yuan to 150 billion yuan capital expenditure to build the 3G network from scratch.
Song Junde, a professor at Beijing University of Post and Telecommunications, estimates the four carriers - China Mobile, China Unicom, China Telecom and China Netcom - together would invest as much as 400 billion yuan to build their 3G networks.
Together with all related investments, including telecommunications equipment manufacturing, wireless content and applications, and sales and marketing, the 3G industry would generate one trillion yuan in economic value and boost China's gross domestic product 5.5 per cent, Mr Song said.
Although China's 3G market offers huge opportunities for equipment vendors, handset makers, Internet content services and applications providers, the carriers face huge financial burdens due to heavy capital requirements in the building of networks.
It is widely expected that all four telecommunications operators will receive 3G licences in the middle of next year, while financing the 3G networks will begin in the second half of the year.
None of the three listed Chinese telecoms operators have factored in their 3G capital investments in existing capex plans for the next two to three years, but are expected to commit up to US$1 billion in capital expenditure next year, while unlisted China Netcom has budgeted $4.7 billion.
